Venture Capital, Six Trends to Consider

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Since 2009, when I started FinSMEs, several things have changed in the startup financing world.
From web to mobile and sensors, which allow the rise of IoT, from on-premise to SaaS based software, from SMS to communication platforms, from e-commerce to same day delivery, from social to mobile and VR gaming, from Peer to Peer lending to crowdfunding, from mpos to bitcoin, from traditional to 3D printing, several tech trends have emerged and become reality, following the usual period of hype and strong injections of capital (from angels, vcs and crowds), which allow consolidation.

A lot of stuff, no doubt. But in this “mare magnum“, changes have occurred and some¬†peculiarities can be picked. Lets’ have a look at some of them.

1) Crowdfunding
Venture capitalists and angel investors have generally been supporting the effort to build all of these ecosystems from their infancy to a later stage. But in some arenas, crowdfunding has started closing the gap of capital at the critical earliest stages. In sectors like 3D printing or VR, for example, startups receives backing from the crowds of Kickstarter, Indiegogo, and other platforms. In this cases, reward-based crowdfunding has conquered its own role. Vcs come at a later stage.
Following a period of massive hype in 2012 and 2013, equity crowdfunding is now living a transition period. In some countries, where the rules already allow it, it is starting to express its power, e.g. the UK (Crowdcube), Germany (Companisto), France (WiSeed). In the USA, where it is permitted only to accredited investors, AngelList seems to have taken the lead.

2) Participative Models
Agreeing with Mark Suster of Upfront Ventures, a new wave of funds have been reinterpreting the industry in a more participative way. Vc is not only picking the right startup and taking part in board meetings some times a year but also creating a structure to help entrepreneurs thrive in the current landscape. A today’s vc firm should recognize the importance of participation as well as the potential of peer lending with the creation of communities and platforms featuring summits, workshops, market research, in-house tools and resources, etc.
Among them, First Round Capital, Andreessen Horowitz, True Ventures, FF Venture Capital, Google Ventures, 500 Startups, and the same Upfront are some examples of how the vc industry is reinterpreting itself in a more participative way.

3) Thematic Funds
During the last few years, the creation of thematic funds, focused on investing in specific tech areas, has represented a consistent trend in an effort to surpass the generalistic model, which seems to underperform expert-led approaches. Some examples include Ribbit Capital, Moscow-based vc Life.SREDA, London-based BT Venture Capital and New York City-based Liberty City Ventures (only Bitcoin) in the fintech sector, Amplify Partners in the Infrastructure 2.0 technology, NewSchools Venture Fund in edtech, etc.

4) Upstream and Downstream
In the meantime, upstream, new data-driven platforms (Mattermark, Datafox, CB Insights and Disco.vc in Europe etc.) promise to help investors facilitate their decision making process and pick winners. Downstream, others (Exitround) try to improve the “exit” processes by matching buyers and sellers, an obstacle that Europeans feel particularly tough to overcome.

5) Corporate Venture Capital
A lot of large companies are either starting (or continuing) their global corporate venture capital efforts, mainly as a means to run a new approach to research and development and to open new geographic directories, especially in emerging markets.
Some examples come from Cisco, which allocated an additional $150m to Cisco Investments, its corporate venture capital arm, Nokia, which launched a USD$100m fund focused on supporting auto tech startups, Intel Capital, which launched a $100m fund focused on accelerating the delivery of Intel technology-based devices in China, Google (nasdaq: GOOG), which launched Google Capital and Google Ventures in Europe ($100m), Santander, which launched a $100m fintech fund (read here), Dell Ventures, which launched a $300m fund, KPMG International, which launched KPMG Capital, and others including Siemens, Sap (with Sap Ventures), Sandisk (Flash memory), Bloomberg (data), Follett (education), and Microsoft, which has unified its approach to startups creating Microsoft Ventures.

6) Chinese Markets?
Curious to see what will happen in China where vc investments in consumer services are set to continue to expand (US$1.9b raised in 123 rounds in 2013). This trend is driven by the impressive growth of smartphone usage (as in other emerging markets), which increases the demand for location-based services such as entertainment, tourism and catering, mobile online gaming and personal finance.

06/08/2014

FinSMEs

Sources:
EY Global venture capital insights and trends 2014
Cambridge Associates 2013 annual industry performance data
KPCB Internet Trends 2014
Mark Suster: Why It’s Morning in Venture Capital
Startools (Blog)
FinSMEs (Blog)

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